How to split utilities

Question

Hello all,I am currently analyzing a 4-plex deal that could provide some significant cash flow. However, the current landlord pays for all the utilities which comes out to roughly $500 a month. The rents are currently as listed:

Upstairs Unit 1: 2 bed 1 bath $850/mo rent

Downstairs Unit 2: 2 bed 1 bath $650/mo rent

Upstairs Unit 3: 1 bed 1 bath $600/mo rent

Downstairs Unit 4: 2 bed 1 bath $625/mo

Does anyone have any experience in changing contracts to maintain rental income coming in while trying to get tenants to pay for their own utilities on one meter? Would appreciate any help!!

Jean Mercer · Answer

It will be smartest to add meeters - it would save you money in the long end. Tenants tend to use less power when they are responsible for the bills. Also, no one can complain that they are being charged for power someone else is using if you try to divvy up the bill.

Max Versteppen · Answer

On IOU, you can upload different expenses, share them equally among roommates, and send each other email reminders of when they are due. Venmo is a free app that allows users to pay each other directly. Venmo is a quick and easy way to split utility bills.

Jaysen Medhurst · Answer

@Connor Streit, best route is for individual meters as @Jean Mercer noted. Get an estimate for that cost. So much will depend on the layout of the building and current mechanicals. Stay open to different solutions. If you have hydronic heat, that may be nearly impossible to split out economically. But if you can easily split out the electric, you could consider installing mini-splits to provide heat and A/C. That A/C could be a competitive advantage.

You can also look into RUBS or aftermarket sub-metering. RUBS isn't legal everywhere and sub-metering might be very easy or nearly impossible depending on how the building is set up.

Lastly, if you were to get the utilities over to the tenants, what does that do to your rents? You're probably getting a premium with utilities included. Do a rent-market study to understand what you'll be able to charge.

How to split utilities

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